Attached files
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8-K - FORM 8-K - MModal Inc. | y90129e8vk.htm |
Exhibit 99.1
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IN RE MEDQUIST, INC.
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: | SUPERIOR COURT OF NEW JERSEY | ||
SHAREHOLDER LITIGATION
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: | BURLINGTON COUNTY: CHANCERY | ||
: | DIVISION | |||
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: | DOCKET NO. C-018-11 |
MEMORANDUM OF UNDERSTANDING
The plaintiffs (Plaintiffs) and defendants (Defendants) (collectively, the Parties) to
the above-captioned class-action lawsuit (the Action) currently pending in the Superior Court of
New Jersey, Burlington County, Chancery Division (the Court), by and through their respective
counsel, have reached an agreement in principle providing for the settlement of the Action (the
Settlement) on the terms and subject to the conditions set forth in this Memorandum of
Understanding (MOU):
WHEREAS, in August 2008, MedQuist Holdings Inc. (Holdings, formerly known as CBaySystems
Holdings Limited) acquired 69.5% of the outstanding shares of MedQuist Inc. (MedQuist) from
Koninklijke Philips Electronics N.V.;
WHEREAS, on September 30, 2010, Holdings and certain minority shareholders of MedQuist, who
collectively owned approximately 12.7% of MedQuists outstanding common stock, entered into an
exchange agreement, which was subsequently amended on December 30, 2010 (the Private Exchange);
WHEREAS, under the Private Exchange, the participating MedQuist minority shareholders would
receive one share of Holdings common stock for each share of MedQuist common stock;
WHEREAS, on October 1, 2010, at the time it announced the Private Exchange, Holdings also
announced that it intended to make a public exchange offer (the Public
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Exchange) to MedQuist shareholders who were not parties to the Private Exchange based on the
exchange ratio used in the Private Exchange;
WHEREAS, on October 18, 2010, Holdings filed with the Securities and Exchange Commission (the
SEC) a registration statement for the Public Exchange, and on February 3, 2011, Holdings
commenced the Public Exchange, which was scheduled to expire on March 4, 2011;
WHEREAS, on February 11, 2011, the Private Exchange closed, which resulted in Holdings
ownership interest in MedQuist increasing from 69.5% to 82.2%;
WHEREAS, on January 21, 2011, MedQuist filed a pre-commencement Schedule 14D-9 (the 14D-9)
with the SEC in which MedQuist, inter alia, indicated that its Audit Committee reviewed and
considered the Exchange Offer with its independent financial and legal advisors and, based solely
upon the information provided to it by [Holdings] and MedQuist, believes that the Exchange Offer
will be fair to MedQuist shareholders (other than [Holdings] and the shareholders participating in
the Private Exchange) and, once the Exchange Offer has been commenced, intends to recommend that
the MedQuist shareholders accept the Exchange Offer and tender their shares;
WHEREAS, the initial class action complaints in the matters entitled Metallo v. Aquilina, et
al. (No. C-018-11, the Metallo Action) and Lawrence v. Aquilina, et al. (No. C-018-11, the
Lawrence Action) were filed with this Court on February 8, 2011 and February 10, 2011,
respectively;
WHEREAS, the initial class action complaints in the Metallo Action and Lawrence Action
alleged, inter alia, that: (i) the members of the MedQuist board of directors (the Board) and
Holdings breached their fiduciary duties to MedQuist and its remaining minority
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shareholders in relation to the Public Exchange; and/or (ii) a short form merger following the
Public Exchange would violate the New Jersey Shareholders Protection Act;
WHEREAS, on February 15, 2011, Plaintiff in the Lawrence Action filed an Order to Show Cause
and Brief in Support of Order to Show Cause (Order to Show Cause) seeking expedited discovery
relating to the Exchange Offer, and a briefing schedule and hearing date for Plaintiff Lawrences
application for a preliminary injunction; on the same date, Plaintiff in the Lawrence Action served
Plaintiffs First Request for Production of Documents;
WHEREAS, on February 16, 2011, the Company filed a post-commencment Schedule 14D-9 (the
Schedule 14D-9) with the SEC disclosing, inter alia, that the Public Exchange is advisable, in
the best interests of and fair to MedQuists minority shareholders;
WHEREAS, on February 17, 2011, Plaintiff in the Metallo Action filed (a) an Order to Show
Cause seeking the same relief sought in the Lawrence Action and (b) an Amended Complaint, which
included additional allegations regarding the Schedule 14D-9;
WHEREAS, on February 18, 2011, Holdings filed a Memorandum in Opposition to the Order to Show
Cause; on the same date, MedQuist and the MedQuist Board filed a Memorandum in Opposition to the
Order to Show Cause;
WHEREAS, on February 22, 2011, Plaintiff in the Lawrence Action filed a Reply Brief in Support
of the Order to Show Cause application;
WHEREAS, on February 22, 2011, Plaintiff in the Lawrence Action filed a First Amended
Shareholder Class Action Complaint (the Amended Complaint);
WHEREAS, the Amended Complaint alleged, inter alia, additional allegations that the members of
the MedQuist Board and Holdings breached their fiduciary duties to MedQuist and its public
shareholders in relation to the Public Exchange; the Amended Complaint alleged
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specifically that the Public Exchange was wrongfully coercive and that Defendants had made
misleading and incomplete disclosure in their public filings, including the Schedule 14D-9; the
Amended Complaint also sought injunctive and declaratory relief concerning the New Jersey
Shareholders Protection Act;
WHEREAS, on February 22, 2011, Plaintiffs in the Metallo Action and the Lawrence Action filed
a Motion for Consolidation and Appointment of Interim Lead Counsel;
WHEREAS, on February 22, 2011, the Court conducted a hearing on the Order to Show Cause; at
the hearing, the Court (a) granted Plaintiffs Motion for Consolidation and Appointment of Interim
Lead Counsel; (b) denied Plaintiffs application for expedited discovery; (c) set a hearing date
for Plaintiffs application for a preliminary injunction for March 2, 2011; and (d) encouraged the
Parties to the Action to set a briefing schedule accordingly1;
WHEREAS, following the February 22, 2011 hearing, counsel for Plaintiffs and Defendants in the
Action engaged in arms-length negotiations concerning a possible settlement of the Action;
WHEREAS, on February 25, 2011, Plaintiffs filed their Opening Brief in Support of Their Motion
for Preliminary Injunction and Declaratory Relief;
WHEREAS, on March 1, 2011, Holdings filed its Memorandum of Law in Opposition to Plaintiffs
Preliminary Injunction Motion;
WHEREAS, on March 1, 2011, MedQuist and the MedQuist Board filed their Memorandum of Law in
Opposition to Plaintiffs Preliminary Injunction Motion;
WHEREAS, on March 2, 2011, Plaintiffs filed their Reply Memorandum in Further Support of Their
Motion for a Preliminary Injunction and Declaratory Relief;
1 | The Parties thereafter agreed to a briefing schedule for Plaintiffs Motion for a Preliminary Injunction. |
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WHEREAS, on March 2, 2011, prior to the hearing on Plaintiffs Motion for a Preliminary
Injunction and Declaratory Relief before this Court, the Parties reached an agreement in principle
to settle the Action, and advised the Court that the parties had reached such agreement in
principle as described herein;
WHEREAS, subject to confirmatory discovery, Plaintiffs and their counsel believe that a
settlement of the Action on the terms reflected in this MOU are fair, reasonable, adequate and in
the best interests of MedQuists public minority shareholders;
WHEREAS, the Defendants, to avoid the costs, disruption, and distraction of further
litigation, and without admitting the validity of any allegations made in the Action, or any
liability with respect thereto, have concluded that it is desirable that the claims against them be
settled and dismissed on the terms reflected in this MOU;
WHEREAS, the Defendants maintain that they have committed no breach of any fiduciary or other
duty in connection with the Public Exchange;
WHEREAS, the Defendants maintain that they have not taken any action in violation of the New
Jersey Shareholders Protection Act and do not concede that a short form merger following the
Public Exchange would violate the New Jersey Shareholders Protection Act; and
WHEREAS, the members of the MedQuist Board acknowledge that they were made aware of the claims
and allegations asserted by Plaintiffs in the Action in connection with the Public Exchange;
NOW THEREFORE, on March 4, 2011, the Parties to the above-mentioned Action reached the
following agreement in principle which, when reduced to a settlement stipulation following
negotiations by the Parties in good faith, is intended to be a full and final resolution of the
Action (the Settlement):
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1. Extend Public Exchange. Holdings has agreed to extend the expiration of the
Exchange Offer to 5:00 p.m., New York City time on March 11, 2011, unless further extended or
earlier terminated by agreement of the parties. Holdings agrees to announce such extension on
March 4, 2011.
2. Short-Form Merger. Holdings agrees that, subject to Final Court Approval (defined
below) of the Settlement and no court order precluding such action: (i) if Holdings owns at least
90% of all outstanding shares of MedQuist common stock after the close of the Public Exchange,
Holdings will use commercially reasonable efforts to, within thirty (30) days following Final Court
Approval, file with the SEC a registration statement under the Securities Act of 1933, as amended,
to register Holdings common stock to be issued in the Short-Form Merger (as defined below) and,
(ii) promptly after the SEC declares such registration statement effective, conduct a short-form
merger under applicable law, with no appraisal or dissenters rights (the Short-Form Merger), to
acquire the remaining shares of MedQuist common stock it does not own for the same consideration
that is being offered in the Public Exchange; that is, MedQuist stockholders who are subject to the
Short-Form Merger would receive one share of Holdings common stock for each share of MedQuist
common stock they own at the effective time of the Short-Form Merger. Plaintiffs agree to release
their claims relative to the New Jersey Shareholders Protection Act and allow the Short-Form
Merger to proceed, provided the Short-Form Merger occurs substantially in the manner and on the
terms described in this paragraph.
3. Additional Disclosures. The Parties agree that MedQuist will cause supplemental
disclosures concerning the Exchange Offer, in the form agreed to by
counsel on March 4, 2011, to be included in an
amended Schedule 14D-9 to be filed with the SEC before the
market opens on March 7, 2011. Plaintiffs agree to release
their claims relative to the Public Exchange, and all disclosure (or absence of
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disclosure) in respect thereof, and allow the Public Exchange to proceed, provided additional
disclosure occurs substantially in the manner and on the terms described in this paragraph.
4. Substantial Benefits of Settlement. The Parties agree and acknowledge that the
terms set forth in paragraphs 1-3 hereof confer substantial benefits on the Class (as defined
below).
5. Settlement Stipulation. Subject to the completion of agreed-upon confirmatory
discovery, which the Parties commit will conclude within twenty-one (21) days from the date of
execution of this MOU, the Parties shall negotiate in good faith and execute a Stipulation of
Settlement (the Settlement Stipulation) and will use their best efforts to present the Settlement
Stipulation and such other documentation as may be required (the Settlement Documents) to the
Court within thirty (30) days from the date of this MOU in order to obtain Court approval of the
Settlement (such proceedings being collectively referred to herein as the Settlement Related
Proceedings). As used herein, Final Court Approval of the Settlement means the Court has
entered an order approving the Settlement and that Order is finally affirmed on appeal or is no
longer subject to appeal, review following a writ petition, or any other form of judicial review.
If the Parties are unable to reach agreement with respect to the Settlement Stipulation, then any
of the Parties to this MOU have the right to seek Court approval of the Settlement to enforce the
terms of this MOU.
6. Confirmatory Discovery. Defendants will provide Plaintiffs counsel in the Action
with certain discovery to confirm the fairness and adequacy of the Settlement and the disclosures
relating to the Public Exchange. This discovery shall consist of copies of the minutes of all
meetings of the MedQuist Board and the Audit Committee of the MedQuist Board, and all Moelis
financial presentations provided to the full Board and the Audit Committee with respect to
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the Exchange Offer, in each case during the following dates: November 19, 2010 through
February 14, 2011. Plaintiffs counsel also shall be permitted to interview the Audit Committees
independent counsel on terms agreed to by the parties, including those set forth in a February 28,
2011 email from Chet Kronenberg to Michael Wagner, and at a location, agreeable to Plaintiffs
counsel, Defendants counsel and the Audit Committees independent counsel.
7. Certification of Class. The Settlement Stipulation shall provide for the
conditional certification for settlement purposes only of the Action as a non-opt-out class action
pursuant to Rules 4:32-1(b)(1) and (b)(2) of the New Jersey Court Rules, consisting of all holders
of common stock of MedQuist through and including the date of the closing of the Short-Form Merger,
including any and all of their respective successors in interest, predecessors, representatives,
trustees, executors, administrators, heirs, assigns or transferees, immediate and remote, and any
person or entity acting for or on behalf of, or claiming under, any of them, and each of them (the
Class). Excluded from the Class are Defendants, their immediate families and their affiliates.
In the event the Settlement does not become final for any reason, Defendants reserve the right to
oppose certification of a class in future proceedings.
8. Governing Law. This MOU and the Settlement contemplated by it shall be governed by
and construed in accordance with the laws of the State of New Jersey. The Parties agree that the
Court shall have exclusive jurisdiction over any dispute arising out of or relating in any way to
this Action, the MOU or the Settlement Stipulation, and the parties further waive any right to
demand a jury trial as to any such dispute.
9. Stay Pending Court Approval. Pending negotiation, execution and Court approval of
the Settlement, Plaintiffs agree to stay the proceedings in the Action and to stay and not to
initiate any and all other proceedings other than those incident to the Settlement itself.
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The Parties also agree to use their best efforts to prevent, stay or seek dismissal of and
oppose entry of any interim or final relief in favor of any member of the Class in any other
litigation against any of the Parties which challenges the Settlement, the transactions
contemplated by the Exchange Offer or Short-Form Merger or otherwise involves a settled claim.
10. Injunction Against Further Proceedings. The Settlement Stipulation shall provide
for an injunction against any further proceedings in the Action other than proceedings to implement
the Settlement. The Settlement Stipulation, including the proposed Preliminary Approval Order
attached as an exhibit thereto, shall further provide for an injunction against the members of the
Class bringing any claims covered by the Settlement in any other action, suit or proceeding. If
any action is filed in any court asserting claims that are related to the subject matter of the
Action prior to Final Court Approval of the proposed Settlement, the Parties shall cooperate in
obtaining the dismissal or withdrawal of such related litigation, including where appropriate
joining in any motion to dismiss or demurrer to such litigation.
11. Releases as to Defendants. The Settlement Stipulation shall include the complete
discharge, dismissal with prejudice on the merits, release and settlement to the fullest extent
permitted by law, of all known and unknown claims of every nature and description whatsoever,
whether or not concealed or hidden against Defendants and their respective predecessors,
successors-in-interest, parents, subsidiaries, affiliates, representatives, agents, officers,
directors, trustees, executors, heirs, spouses, marital communities, assigns or transferees and any
person or entity acting for on behalf of any of them, and each of their respective predecessors,
successors-in-interest, parents, subsidiaries, affiliates, representatives, agents, officers,
directors, trustees, executors, heirs, spouses, marital communities, assigns or transferees or any
person or entity acting for on behalf of any of them and each of them (including, without
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limitation, S.A.C. Private Capital Group, LLC, its affiliates, and any and all investment
bankers, accountants, insurers, reinsurers or attorneys and any past, present or future officers,
directors and employees of any of them) (all of the foregoing, collectively, the Released Persons)
and each of them that have been or could have been asserted by Plaintiffs or any member of the
Class during the class period, including class, individual or other claims, in state or federal
court, and, based upon, arising from, or related to the claims or allegations in the Action
including, but not limited to, claims or allegations based upon, arising from, or related to: (i)
the Public Exchange; (ii) the adequacy of the exchange ratio in connection with the Public
Exchange; (iii) the fiduciary obligations, if any, of the Defendants or Released Persons in
connection with the Public Exchange; (iv) the processes, events and analyses leading up to the
Public Exchange; (v) the disclosures or disclosure obligations of the Defendants or Released
Persons in connection with the Public Exchange; (vi) the delisting of MedQuist shares from NASDAQ
or the deregistering of MedQuist under the Securities Exchange Act of 1934, as amended, following
the Public Exchange; and (vii) whether the Public Exchange, the issuance of a dividend by MedQuist
to all stockholders, or a short form merger by Holdings following the Public Exchange violates or
would violate the New Jersey Shareholders Protection Act.
12. Release as to Plaintiffs. The Settlement Stipulation shall provide that
Defendants and the Released Persons release Plaintiffs, members of the Class and their counsel,
from all claims arising out of the institution, prosecution, settlement or resolution of the
Action, provided, however, that the Defendants and Released Persons shall retain the right to
enforce in the Court the terms of the Settlement Stipulation.
13. Release Acknowledgment. The Settlement Stipulation shall provide a statement
that: (a) the release contemplated by the Stipulation shall extend to claims that the parties
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granting the release (the Releasing Parties) do not know or suspect to exist at the time of
the release, which if known, might have affected the Releasing Parties decision to enter into the
release; (b) the Releasing Parties shall be deemed to relinquish, to the extent applicable, and to
the full extent permitted by law, the provisions, rights and benefits of § 1542 of the California
Civil Code; and (c) the Releasing Parties shall be deemed to waive any and all provisions, rights
and benefits conferred by any law of any state or territory of the United States, or principle of
common law, which is similar, comparable or equivalent of California Civil Code § 1542.
14. Denial of Liability. The Settlement Stipulation shall provide that Defendants
have denied and continue to deny the allegations made in the Action, and that they have maintained
and continue to maintain that they have committed no breach of fiduciary duty whatsoever, have
committed no statutory violations under New Jersey law, and have committed no disclosure or other
violations, in connection with the Private Exchange, Public Exchange or other matters related to
the Settlement and/or the Action.
15. Notice. MedQuist shall be responsible for providing notice of the Settlement to
the members of the Class and shall pay all costs and expenses incurred in providing such notice,
with the understanding that notice shall be effected by mail with respect to the MedQuist
shareholders of record on or about the time of such mailing and, with respect to all other Class
members, by public notification.
16. Fees and Expenses. In light of the substantial benefits conferred on the Class as
set forth herein, and subject to the Courts approval, the Settlement Stipulation will provide that
MedQuist and/or Holdings (or any successor-in-interest) will pay Plaintiffs counsel attorneys
fees (inclusive of disbursements) in an amount to be awarded by the Court, but in no event more
than $400,000.00 (said amount having been agreed upon as the maximum amount payable by
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MedQuist, Holdings and/or any of the other Defendants following arms-length negotiations
after the parties negotiated the other aspects of the Settlement) to be paid within ten (10)
business days after the later to occur of (i) consummation of the Short-Form Merger and (ii) the
Final Approval Date. Plaintiffs counsel in the Action agree not to make an application for an
award of more than $400,000.00 in fees (inclusive of disbursements) in the aggregate, and Defendants agree not to oppose such application provided that the aggregate amount does not exceed $400,000.00. In the event
that the Courts order is reversed or modified on appeal, Plaintiffs counsel shall refund to
MedQuist and/or Holdings (or any successor-in-interest) the full amount of such fees (and
disbursements).
17. Approval. The Settlement is subject to Court approval, including the attorneys
fees referred to in paragraph 16, provided however, that the Courts approval of the Settlement is
not contingent on its approval of such fees. If, for any reason, the Settlement is not approved
by the Court, is terminated, overturned, or materially modified on appeal or as a result of further
proceedings on remand, or otherwise does not become effective, unless the Parties shall agree
otherwise, the Parties shall revert to their litigation positions immediately prior to the
execution of this MOU.
18. Effective Date. The Effective Date of the Settlement of the Action shall be the
date of Final Court Approval.
19. Dismissal With Prejudice. Plaintiffs in the Action shall seek dismissal of the
Action with prejudice within ten (10) business days of the Effective Date.
20. Binding Effect. This MOU is an enforceable contract and is binding on all of the
Parties and their respective agents, executors, heirs, successors and assigns. The MOU shall be
null and void and of no force and effect, unless otherwise agreed to by the parties pursuant to the
terms hereof, if (a) the Settlement does not obtain Final Court Approval for any reason; (b)
Plaintiffs in the Action conclude, after obtaining the confirmatory discovery agreed upon,
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that the Settlement memorialized herein is not fair, adequate, and in the best interests of the
Class, and Plaintiffs so notify Defendants in writing on or prior to the end of the twenty-one (21)
day period set forth in Paragraph 5; (c) the Short-Form Merger has not been consummated under
circumstances in which one or more of the conditions set forth in Paragraph 2 herein has not been
satisfied. In the event this MOU becomes null and void pursuant to the terms of this Paragraph, or
the Settlement for any reason is not effectuated, the MOU shall not be deemed to prejudice in any
way the respective positions of the Parties with respect to the Action, and neither the existence
of this MOU, nor its contents, nor the negotiations leading to it, shall be admissible in evidence
or shall be referred to for any purpose in the Action or in any other litigation or proceeding.
21. Execution by Counterparts. This MOU may be executed in any number of actual,
telecopied or electronically distributed counterparts and by each of the different Parties on
several counterparts, each of which when so executed and delivered will be an original. The
executed signature page(s) from each actual, telecopied or electronically distributed counterpart
may be joined together and attached and will constitute one and the same instrument.
22. Modifications. This MOU may be modified or amended only by a writing signed by
the Parties hereto.
EXECUTED AND AGREED:
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Simpson Thacher Bartlett LLP Attorneys for Defendant MedQuist Holdings Inc. |
Barroway Topaz Kessler Meltzer & Check, LLP Interim Co-Lead Counsel for Plaintiffs |
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By:
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/s/ Chet Kronenberg | By: | /s/ Michael C. Wagner | |||||||
Dated: 3-4-11 | Dated: 3-4-11 | |||||||||
Pepper Hamilton LLP Attorneys for Defendants MedQuist Inc. and the MedQuist Inc. board of directors |
Prickett, Jones & Elliott, P.A. Interim Co-Lead Counsel for Plaintiffs |
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By:
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/s/ Angelo A. Stio III | By: | /s/ Paul A. Fioravanti | |||||||
Dated: 3-4-11 | Dated: 3-4-11 | |||||||||
Lowenstein Sandler PC Attorneys for Defendant MedQuist Holdings Inc. |
Levi Korsinsky, LLP Interim Co-Lead Counsel for Plaintiffs |
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By:
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/s/ Sheila Sadighi | By: | /s/ Donald Enright | |||||||
Dated: 3-4-11 | Dated: 3-4-11 | |||||||||
Trujillo Rodriguez & Richards, LLC Interim Liaison Counsel for Plaintiffs |
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By: | /s/ Lisa Rodriguez | |||||||||
Dated: 3-4-11 |
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